Wintrust's Payoff Near from Recent M&A Costs, CEO Says

Merger-related expenses took a nearly $6 million bite out of third-quarter earnings at Wintrust Financial in Rosemont, Ill., but its chief executive predicted several recently completed deals will pay off sooner than anticipated.

The $22 billion-asset company reported net income of $38.4 million during the third quarter; it earned 73 cents per share on an adjusted basis, well short of the Bloomberg consensus of 85 cents. Its net income a year earlier was $43.8 million, but year-over-year comparisons are complicated by the fact that the company has completed several deals in recent quarters.

Wintrust closed on three acquisitions in the third quarter alone: Community Financial Shares, Suburban Illinois Bancorp and North Bank. Altogether acquisition-related expenses totaled roughly $5.7 million. Including these charges, noninterest expenses rose 16% year over year, to $160 million.

More M&A expenses are expected, Chief Executive Ed Wehmer warned.

"We anticipate approximately $4 million in additional charges related to the three previously announced acquisitions in July over the next two quarters as the conversions and integrations are completed," he said in a news release last week detailing the company's quarterly results.

However, he said cost savings from the three deals had exceeded initial expectations and he emphasized the long-term benefits of the deals.

"We believe we have achieved approximately two-thirds of our expected annual cost savings to date and expect to realize additional annual cost savings of approximately $5 million by the end of the first quarter of 2016," Wehmer said.

He cited several benefits from the deals, noting that more than half of Wintrust's 5% loan growth from the second to the third quarters came from $455 million of loans added in the three deals. That growth offset shrinking margins, he said.

Net interest income rose 6% from the second quarter, to $165.5 million. Net interest margin, meanwhile, narrowed 8 basis points from the second quarter to 3.33%.

Wintrust remains eager to pursue more M&A, Wehmer said.

"We remain on track to realize cost savings opportunities in the future from our existing infrastructure as additional acquisition opportunities exist in all areas of our business lines," Wehmer said.

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